Chicago Business Litigation Lawyer Blog
It’s commonly said that you have to spend money to make money, but taken too far, that philosophy can easily bankrupt a company. When that company has investors and shareholders whose money you’re spending so you can try to make money, you have to justify your expenses to those shareholders. You have a responsibility to spend their money wisely so they can expect a good return on their investment.
According to a series of lawsuits filed against Madison Square Garden Entertainment Corp., the company allegedly made a series of moves the shareholders considered to be in violation of the company’s fiduciary duty.
One such move was the decision made by MSG Network’s board of directors and controlling stockholders to merge with MSG Entertainment. The reason given for the move was to save costs, but the minority shareholders allege the move was not made with their best interests in mind.
That lawsuit was part of a series of lawsuits surrounding the MSG Sphere, which is under construction at The Venetian. The giant sphere will seat 17,500 people and is expected to open with performances by U2. The goal of the sphere was to create a giant entertainment venue that would become a destination for tourists and concert goers.
In practice, construction of the sphere has already cost almost double the estimated expense. So far, the cost has gone up to $2.2 billion and the sphere has taken five years to complete. Construction workers broke ground on the project in 2018 and the sphere was initially projected to open in 2021, but construction was delayed due to the pandemic and supply chain issues.
MSG Networks has agreed to pay $48.5 million to settle the claims of the four shareholder groups who filed the lawsuits against the company. As part of the settlement agreement, MSG Networks has not admitted to any wrongdoing, but the company’s legal challenges might not be over yet.
The art of negotiating a settlement involves determining the middle ground between how much the plaintiffs are willing to accept and how much the defendants are willing to pay. The defendant’s insurance company is not usually included in the negotiations, which can get tricky if the defendant is expecting their insurance company to cover the cost of the settlement.
According to a filing with the Securities and Exchange Commission (SEC), MSG Networks and its insurance company disagree over whether and how much the insurance company is expected to pay for the settlement. If the parties can’t come to an agreement on their own, that dispute will go to Delaware insurance coverage action to be resolved.
Whether it’s a class action lawsuit or another complex business dispute that needs unraveling, we would be pleased to discuss your needs and challenges and our ability to meet them during a Free consultation. It doesn’t matter where you’re located in the Chicagoland area, from Northfield to Naperville, we’ve got a convenient location near you and more importantly, an ability to hear not just listen. Call us at 630-333-0333 or via our website by clicking here. We look forward to speaking with you.